BILL NUMBER: AB 1688	CHAPTERED  09/23/99

	CHAPTER   470
	FILED WITH SECRETARY OF STATE   SEPTEMBER 23, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 23, 1999
	PASSED THE ASSEMBLY   SEPTEMBER 7, 1999
	PASSED THE SENATE   SEPTEMBER 2, 1999
	AMENDED IN SENATE   AUGUST 31, 1999
	AMENDED IN SENATE   AUGUST 16, 1999

INTRODUCED BY   Assembly Member Papan

                        MARCH 18, 1999

   An act to amend Sections 1300 and 25219 of the Corporations Code,
to amend Section 45308.5 of the Government Code, to amend Section
1170.3 of the Harbors and Navigation Code, to amend Sections 1792.2
and 25112.5 of the Health and Safety Code, and to amend Sections
1192.8 and 11521.2 of the Insurance Code, relating to securities.


	LEGISLATIVE COUNSEL'S DIGEST


   AB 1688, Papan.  Securities.
   Existing law regulates the ownership and sale of, and investment
in, securities registered on a national security exchange, as
provided by federal law.
   The bill would incorporate and make applicable to securities
listed on the National Market System of the NASDAQ Stock Market
various provisions of state law relating to the following:  the
purchase of dissenting shares in connection with a corporate
reorganization; the suspension of over-the-counter trading by agents
and broker-dealers; a conflict of interest code for pilots involving
the ownership of tugboats; the composition of reserves required to be
maintained by entities executing or assuming continuing care
contracts; the submission of disclosure statements by hazardous waste
control applicants; authorized excess funds investments for domestic
life insurers; and authorized investments by certain governmental
retirement systems in common and preferred stock, as specified.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 1300 of the Corporations Code is amended to
read:
   1300.  (a) If the approval of the outstanding shares (Section 152)
of a corporation is required for a reorganization under subdivisions
(a) and (b) or subdivision (e) or (f) of Section 1201, each
shareholder of the corporation entitled to vote on the transaction
and each shareholder of a subsidiary corporation in a short-form
merger may, by complying with this chapter, require the corporation
in which the shareholder holds shares to purchase for cash at their
fair market value the shares owned by the shareholder which are
dissenting shares as defined in subdivision (b).  The fair market
value shall be determined as of the day before the first announcement
of the terms of the proposed reorganization or short-form merger,
excluding any appreciation or depreciation in consequence of the
proposed action, but adjusted for any stock split, reverse stock
split, or share dividend which becomes effective thereafter.
   (b) As used in this chapter, "dissenting shares" means shares
which come within all of the following descriptions:
   (1) Which were not immediately prior to the reorganization or
short-form merger either (A) listed on any national securities
exchange certified by the Commissioner of Corporations under
subdivision (o) of Section 25100 or (B) listed on the National Market
System of the NASDAQ Stock Market, and the notice of meeting of
shareholders to act upon the reorganization summarizes this section
and Sections 1301, 1302, 1303 and 1304; provided, however, that this
provision does not apply to any shares with respect to which there
exists any restriction on transfer imposed by the corporation or by
any law or regulation; and provided, further, that this provision
does not apply to any class of shares described in subparagraph (A)
or (B) if demands for payment are filed with respect to 5 percent or
more of the outstanding shares of that class.
   (2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not
voted in favor of the reorganization or, (B) if described in
subparagraph (A) or (B) of paragraph (1) (without regard to the
provisos in that paragraph), were voted against the reorganization,
or which were held of record on the effective date of a short-form
merger; provided, however, that subparagraph (A) rather than
subparagraph (B) of this paragraph applies in any case where the
approval required by Section 1201 is sought by written consent rather
than at a meeting.
   (3) Which the dissenting shareholder has demanded that the
corporation purchase at their fair market value, in accordance with
Section 1301.
   (4) Which the dissenting shareholder has submitted for
endorsement, in accordance with Section 1302.
   (c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of
record.
  SEC. 2.  Section 25219 of the Corporations Code is amended to read:

   25219.  Notwithstanding any other provision of this division, if
in his or her opinion the public interest and the protection of
investors so require, the commissioner is authorized summarily to
suspend all over-the-counter trading in this state by broker-dealers
and agents in any security or summarily to suspend all trading on a
national securities exchange located in this state in any security
(provided, in the case of trading on that exchange, that the security
is not listed on the National Market System of the NASDAQ Stock
Market or any national securities exchange located outside this state
on which trading has not been suspended) for a period not exceeding
90 days, and for successive periods of 90 days.  No broker-dealer or
agent shall effect any transaction (other than an unsolicited
brokerage transaction effected on the National Market System of the
NASDAQ Stock Market or on a national securities exchange located
outside this state) in, or induce or attempt to induce the purchase
or sale of, any security in this state in which trading is in any
manner suspended under this section, except in performance of a
contract previously entered into.
  SEC. 3.  Section 45308.5 of the Government Code is amended to read:

   45308.5.  Notwithstanding Section 45308.1, in addition to any
other investments as are authorized by this article, city retirement
systems may in their discretion under the advice of proper counsel
invest the assets of the retirement fund in an amount, determined on
the basis of cost, not to exceed 10 percent of the assets in the
first two years after the effective date of this section, not to
exceed 15 percent during the third year after the effective date of
this section, and not to exceed 25 percent thereafter, in common
stock or shares, and not to exceed 2 percent of the assets in the
first year after the effective date of this section, not to exceed 3
percent during the second year after the effective date of this
section, and not to exceed 5 percent thereafter, in preferred stock
or shares, of corporations created or existing under the laws of the
United States, or any state, district, or territory thereof; provided
that
   (a) The stock is registered on a national securities exchange, as
provided in the "Securities Exchange Act of 1934" as amended, or is
listed on the National Market System of the NASDAQ Stock Market.  The
registration shall not be required with respect to the following
stocks:
   (1) The common stock of a bank which is a member of the Federal
Deposit Insurance Corporation and has capital funds, represented by
capital, surplus, and undivided profits, of at least fifty million
dollars ($50,000,000);
   (2) The common stock of an insurance company which has capital
funds, represented by capital, special surplus funds, and unassigned
surplus, of at least fifty million dollars ($50,000,000);
   (3) Any preferred stock.
   (b) The corporation has total assets of at least one hundred
million dollars ($100,000,000);
   (c) Bonds of that corporation, if any are outstanding, qualify for
investment of the retirement fund, and that there are no arrears of
dividend payments on its preferred stock;
   (d) The corporation has paid a cash dividend on its common stock
in at least 8 of the 10 years next preceding the date of investment,
and the aggregate net earnings available for dividends on the common
stock of the corporation for the whole of that period have been equal
to the amount of the dividends paid, and the corporation has paid an
earned cash dividend in each of the last three years;
   (e) The investment in any one company may not exceed 5 percent of
the common shares outstanding; and
   (f) No single common stock investment, based on cost, may exceed 2
percent of the assets of the fund.
  SEC. 4.  Section 1170.3 of the Harbors and Navigation Code is
amended to read:
   1170.3.  (a) The board shall adopt, by regulation, a pilot's
conflict-of-interest code which shall include, but not be limited to,
a provision specifying that a pilot shall not have any interest in,
or derive any income from, any tugboat in operation on the Bays of
San Francisco, San Pablo, and Suisun.  This requirement of
divestiture does not apply to the ownership of barges and vessels
similar to barges.
   (b) The conflict-of-interest code shall not prohibit the ownership
of stock in any corporation registered on a national securities
exchange or on the National Market System of the NASDAQ Stock Market,
pursuant to Section 78f of Title 15 of the United States Code, which
may own tugboats in operation on the Bays of San Francisco, San
Pablo, and Suisun.
  SEC. 5.  Section 1792.2 of the Health and Safety Code is amended to
read:
   1792.2.  (a) Any entity that has executed or assumed continuing
care contracts shall maintain reserves covering obligations
thereunder.
   (b) The following assumptions shall be used when calculating the
reserves:
   (1) The following life expectancy table shall be used in
connection with all continuing care contracts:


    Age     Females     Males           Age     Females     Males
     55      26.323    23.635            83      7.952      6.269
     56      25.526    22.863            84      7.438      5.854
     57      24.740    22.101            85      6.956      5.475
     58      23.964    21.350            86      6.494      5.124
     59      23.199    20.609            87      6.054      4.806
     60      22.446    19.880            88      5.613      4.513
     61      21.703    19.163            89      5.200      4.236
     62      20.972    18.457            90      4.838      3.957
     63      20.253    17.764            91      4.501      3.670
     64      19.545    17.083            92      4.175      3.388
     65      18.849    16.414            93      3.862      3.129
     66      18.165    15.759            94      3.579      2.903
     67      17.493    15.116            95      3.329      2.705
     68      16.832    14.486            96      3.109      2.533
     69      16.182    13.869            97      2.914      2.384
     70      15.553    13.268            98      2.741      2.254
     71      14.965    12.676            99      2.584      2.137
     72      14.367    12.073           100      2.433      2.026
     73      13.761    11.445           101      2.289      1.919
     74      13.189    10.830           102      2.152      1.818
     75      12.607    10.243           103      2.022      1.723
     76      12.011     9.673           104      1.899      1.637
     77      11.394     9.139           105      1.784      1.563
     78      10.779     8.641           106      1.679      1.510
     79      10.184     8.159           107      1.588      1.500
     80       9.620     7.672           108      1.522      1.500
     81       9.060     7.188           109      1.500      1.500
     82       8.501     6.719           110      1.500      1.500

   The life expectancy table set forth in this paragraph shall be
used until this section is amended.
   (2) For residents over 110 years of age use 1.500 for computing
the statutory reserve requirements.
   (3) If a continuing care retirement community has contracted with
a resident under 55 years of age, provide the department with the
methodology used to determine that resident's life expectancy.
   (4) A zero interest assumption shall be used to adjust resident
life expectancies in conjunction with the computation of the
statutory reserve requirement.
   (c) The reserves shall be calculated by progressing through each
of the following steps:
   (1) Compute net cash per capita costs:
   (A) Cash operating expenses:  Deduct: depreciation and other
noncash expenses; processing fees; community services; expenses that
will not be incurred in future years; reimbursements for services to
nonresidents; donated services, if included as an operating expense
on the income statement; investment income; contributions received;
and other items that the continuing care retirement community
reasonably believes should be deducted with accompanying explanation.

   For a continuing care retirement community in its first year of
operation or following a major addition to an existing continuing
care retirement community, cash operating expenses for calculating
reserve requirements may be classified as fixed or variable and
totaled separately.
   (B) Mean number of residents by level of care:  List the number of
residents for each level of care separately at the beginning of the
fiscal year.  Add the number of residents for each level of care
separately at the end of the fiscal year.  Divide the total for each
level of care by two.
   (C) Total mean number of residents:  Add the total number of
residents at the beginning of the fiscal year to the total number of
residents at the end of the fiscal year and divide by two.  For
continuing care retirement communities wherein resident population
fluctuates significantly from month to month and for continuing care
retirement communities in their first year of operation, the mean
number of residents by level of care or the total mean number may be
computed by adding the number of residents at the end of each month
in the fiscal year and dividing by the total number of months
included.  The daily attendance for the fiscal year may also be used
to determine the mean number of residents.
   (D) Net cash per capita cost:  Cash operating expenses divided by
the mean number of residents.  It is acceptable, but not required, to
compute net cash per capita for various levels of care, based on
allocated expenses and contributions from consolidated financial
statements.  Allocation methods shall be subject to the approval of
the department, and schedules shall be prepared for all levels of
care, including any levels not covered by continuing care contracts.
For a continuing care retirement community in its first year of
operation or following a major addition to an existing continuing
care retirement community, net cash per capita cost for calculating
reserve requirements may be the sum of the figures determined by
dividing fixed cash operating expenses by the number of residents at
the end of the fiscal year, and dividing variable cash operating
expenses by the mean number of residents.
   (2) Compute projected life cost:
   (A) Compute aggregate life expectancies:  For each resident,
compare age against the life expectancy table and total all life
expectancies.
   (B) Multiply net cash per capita costs by aggregate life
expectancies.
   (3) Compute five-year plan residents:  Determine the maximum
annual total of SSI/SSP payments for the year of entry for each
resident.  If that amount is greater than the amount of the entrance
fee paid by a resident, the resident is designated a "Five-year Plan
Resident" and the entrance fee is amortized over five years.  No
reserves are required for these residents after the fifth year.
   (4) Compute projected life revenue:
   (A) Annual fee:  Multiply by 12 each monthly fee paid by
residents, including payments to be made by third-party payers on
behalf of the resident, including SSI/SSP and Medi-Cal, and
contributions, donations, or endowments, that the provider actually
used for operating expenditures for continuing care contracts during
the fiscal year.
   (B) Continuing care residents requiring full reserves:  Enter the
number of continuing care residents for each annual fee, excluding
five-year plan residents.
   (C) Aggregate life expectancies:  For each resident, compare age
against the life expectancy table and total all life expectancies for
each annual fee.
   (D) Total projected life revenue:  Multiply each annual fee by
aggregate life expectancies.  Total the products obtained.
   (5) Compute statutory reserve:
   (A) Reserves not including five-year plan residents:  Deduct the
projected life revenue from the projected life cost.  If the
remainder is less than zero, use zero.
   (B) Total statutory reserves:  Add the total unamortized balance
for five-year plan residents to the remainder in paragraph (A) above.

   (6) Compute liquid asset portion of statutory reserve:  For
providers that have executed monthly fee contracts with at least
one-half of the residents, compute 5 percent of the total statutory
reserves.  For providers that have executed prepaid contracts with at
least one-half of the residents, compute 25 percent of the total
statutory reserves.
   (d) At least 25 percent of the statutory reserve shall consist of
liquid assets, as defined in paragraph (8) of subdivision (e), except
that a 5 percent requirement shall apply to the continuing care
retirement communities that have executed monthly fee contracts with
at least 50 percent of the residents.
   (e) The assets available for reserves shall consist of the
following:
   (1) Deposits in commercial and savings accounts with California
banks that are members of the Federal Deposit Insurance Corporation.

   (2) Notes receivable by the continuing care retirement community,
that are secured by first deeds of trust and first mortgages on
property not owned by the provider or its affiliates.
   (3) Stocks, bonds, and securities, at current market value unless
otherwise specified, shall meet the following criteria to be approved
as assets available for statutory reserves:
   (A) Highly liquid money securities, including, but not limited to,
United States Treasury Bills, prime banker's acceptances, negotiable
time certificates of deposit, and short-term tax-exempt notes.
   (B) Common stocks rated "above average" or higher by any national
rating agency.  For example, a rating of A+, A, or A- by Standard and
Poor's Corporation is required for common stock.
   (C) Bonds issued by the United States government or federal
agencies.
   (D) Nonfederal bonds that have a current rating of at least "A" by
Moody's Investors Service, Standard and Poor's Corporation, or Fitch
Investors Service, and are listed on a national securities exchange
or on the National Market System of the NASDAQ Stock Market.
   (E) Bonds that are not listed on a national securities exchange or
on the National Market System of the NASDAQ Stock Market, but are
traded over-the-counter and have a current rating of at least "Aa" by
Moody's Investors Service or at least "AA" by Standard and Poor's
Corporation or Fitch's Investors Service.
   (F) The security interest in the cash surrender value of life
insurance policies assigned by residents to the continuing care
retirement community.
   (4) Stocks, bonds, and securities that do not meet the approval
criteria may be retained as part of the reserves with the specific
approval of the department.  If necessary to meet reserve
requirements, stocks, bonds, and securities that are not approved by
the department may be disposed of in a gradual manner, to avoid loss
to certificate holders.
   (5) Real estate used to provide care and housing for holders of
continuing care contracts, or real estate, or equities therein, owned
by the entity as an investment, the rents from which are used to
discharge obligations to holders of continuing care contracts or to
reinvest as a part of the reserves.  These investments may be located
outside the State of California.
   (A) The value of this real estate shall be based on 70 percent of
the net equity thereof, which shall be the book value, assessed
value, or current appraised value within 12 months prior to the end
of the fiscal year, less all encumbrances, depreciation, and the
amount required for reserves for refundable contracts under Section
1793, all according to audited financial statements acceptable to the
department.
   (B) All appraisals shall be prepared by either a member of the
American Institute of Appraisers or a member of the Society of Real
Estate Appraisers, or the county assessor.  The department may
require technical reports to be verified or certified, or both.  The
expense of any technical reports or any verifications thereof shall
be borne by the provider.
   (6) Seventy percent of the net equity in furniture and equipment
situated on property used to provide care and housing for holders of
continuing care contracts.
   (7) Investment certificates or shares in open end investment
trusts, that meet all of the following requirements:
   (A) The trust management shall have experience either managing
another mutual fund registered under the Investment Company Act of
1940 (15 U.S.C.  Sec. 80a-1 et seq.), or have been registered as an
investment adviser under the Investment Advisors Act of 1940 (15
U.S.C. Sec. 80b-1 et seq.), and in either case shall currently have
at least one hundred million dollars ($100,000,000) under its
supervision.
   (B) Qualified for sale in California.
   (C) Has at least 40 percent of its directors or trustees not
affiliated with the fund's management company or principal
underwriter or any of their affiliates.
   (D) Is registered under the Investment Company Act of 1940.
   (E) Is a fund listed as qualifying under rules maintained by the
Commissioner of Corporations in cooperation with the Department of
Insurance.
   (8) Liquid assets, if any, shall consist of the following:
   (A) Listed bonds, stocks, and commercial and savings accounts.
   (B) A sinking fund comprised of liquid assets, if it is a
replacement fund subject to disbursement for items, including, but
not limited to, payment of principal and interest on the mortgage or
for operations during the succeeding year.  Replacement funds, that
may only be used for capital improvements or repairs, shall not be
included in liquid reserves.
   (9) Deposits made prior to signing a continuing care contract
represent liabilities and shall be offset against liquid assets, if
any, otherwise against any other assets.
   (10) Deposits that represent funds turned over to the continuing
care retirement community by residents for safekeeping without
relinquishing control thereof shall be offset against liquid assets,
if any, otherwise against other assets.
  SEC. 6.  Section 25112.5 of the Health and Safety Code is amended
to read:
   25112.5.  "Disclosure statement" means either of the following:
   (a) A statement submitted to the department by an applicant,
signed by the applicant under penalty of perjury, which includes all
of the following information:
   (1) The full name, business address, social security number, and
driver's license number of all of the following:
   (A) The applicant.
   (B) Any officers, directors, or partners, if the applicant is a
business concern.
   (C) All persons or any officers, partners, or any directors if
there are no officers, of business concerns holding more than 5
percent of the equity in, or debt liability of the applicant, except
that if the debt liability is held by a lending institution, the
applicant shall only supply the name and address of the lending
institution.
   (2) The following persons listed on the disclosure statement shall
submit properly completed fingerprint cards:
   (A) The sole proprietor.
   (B) The partners.
   (C) Other persons listed in subparagraph (C) of paragraph (1) and
any officers or directors of the applicant company as required by the
department.
   (3) Fingerprint cards submitted for any person required by
paragraph (2) shall only be submitted once.  Fingerprint cards shall
be completed and submitted for any additional person only if there is
a change in the person serving in a position for which fingerprint
cards are required to be submitted pursuant to paragraph (2).  The
department shall use the information required by paragraph (2) to
positively identify the applicant.
   (4) The full name and business address of any company which
generates, transports, treats, stores, recycles, disposes of, or
handles hazardous waste and hazardous materials in which the
applicant holds at least a 5 percent debt liability or equity
interest.
   (5) A description of any local, state, or federal licenses,
permits, or registrations for the generation, transportation,
treatment, storage, recycling, disposal, or handling of hazardous
waste or hazardous materials applied for, or possessed by the
applicant, or by the applicant under any previous name or names, in
the three years preceding the filing of the statement, or, if the
applicant is a business concern, by the officers, directors, or
partners of the business concern, including the name and address of
the issuing agency.
   (6) A listing and explanation of any final administrative orders
or license revocations or suspensions issued or initiated by any
local, state, or federal authority, in the three years immediately
preceding the filing of the statement, or any civil or criminal
prosecutions filed in the three years immediately preceding, or
pending at the time of, the filing of the statement, with any
remedial actions or resolutions if applicable, relating to the
generation, transportation, treatment, storage, recycling, disposal,
or handling of hazardous waste or hazardous materials by the
applicant, or by the applicant under any previous name or names, or,
if the applicant is a business concern, by any officer, director, or
partner of the business concern.
   (7) A listing of any agencies outside of the state which regulate,
or had regulated, the applicant's, or the applicant's under any
previous name or names, generation, transportation, treatment,
storage, recycling, disposal, or handling of hazardous waste or
hazardous materials in the three years preceding the filing of the
disclosure statement.
   (8) A listing and explanation of any federal or state conviction,
judgment, or settlement, in the three years immediately preceding the
filing of the statement, with any remedial actions or resolutions if
applicable, relating to the generation, transportation, treatment,
storage, recycling, disposal, or handling of hazardous waste or
hazardous materials by the applicant, or by the applicant under any
previous name or names, or if the applicant is a business concern, by
any officer, director, or partner of the business concern.
   (9) A listing of all owners, officers, directors, trustees, and
partners of the applicant who have owned, or been an officer,
director, trustee, or partner of, any company which generated,
transported, treated, stored, recycled, disposed of, or handled
hazardous wastes or hazardous materials and which was the subject of
any of the actions described in paragraphs (6) and (8) for the three
years preceding the filing of the statement.
   (b) In lieu of the statement specified in subdivision (a), a
corporation, the stock of which is listed on a national securities
exchange or on the National Market System of the NASDAQ Stock Market
and registered under the Securities Exchange Act of 1934 (15 U.S.C.
Sec. 78a et seq.), or a subsidiary of that corporation, may submit to
the department copies of all periodic reports, including, but not
limited to, those reports required by Section 78m of Title 15 of the
United States Code and Part 229 (commencing with Section 229.10) of
Chapter II of Title 17 of the Code of Federal Regulations which the
corporation or subsidiary has filed with the Securities and Exchange
Commission in the three years immediately preceding the submittal, if
the corporation or subsidiary thereof has held a hazardous waste
facility permit or operated a hazardous waste facility under interim
status pursuant to Section 25200 or 25200.5 since January 1, 1984.
  SEC. 7.  Section 1192.8 of the Insurance Code is amended to read:
             1192.8.  (a) A domestic life insurer having admitted
assets aggregating in value not less than one hundred million dollars
($100,000,000) may make excess fund investments pursuant to this
section in interest-bearing notes, bonds, or obligations issued by
(1) any operating business trust or limited partnership organized
under the laws of any state of the United States, the District of
Columbia, the Dominion of Canada, any province of the Dominion of
Canada or (2) an authority established pursuant to the California
Industrial Development Financing Act, Title 10 (commencing with
Section 91500) of the Government Code.  The issuer of the notes,
bonds, or obligations through itself or its paying agent shall be
obligated thereunder to make payments, with respect to the notes,
bonds, or other obligations, directly to the insurer or the insurer's
nominee.
   (b) Except upon the prior written approval of the commissioner, an
investment may not be made under the authority of this section
unless the note, bond, or obligation is exchange-traded.
"Exchange-traded," as used in this subdivision, means listed and
traded on the National Market System of the NASDAQ Stock Market or on
a securities exchange subject to regulation, supervision, or control
under a statute of the United States and acceptable to the
commissioner.
   (c) Without the prior written consent of the commissioner
investment made pursuant to this section shall not exceed in the
aggregate 10 percent of the life insurer's policyholder surplus.
   (d) A request to the commissioner for (1) approval pursuant to
subdivision (b) to invest in notes, bonds, or obligations that are
not exchange-traded or (2) consent to exceed the 10 percent
limitation set forth in subdivision (c), shall be in writing and
shall be accompanied by any supporting data and documentation that
the commissioner may require.  The commissioner shall require the
payment of a five thousand dollar ($5,000) fee in advance for the
determination of whether to approve or disapprove each request.  Each
request shall be in writing and shall be deemed approved unless the
commissioner disapproves it within 60 days with respect to requests
under subdivision (c) or 20 days with respect to requests under
subdivision (b), after the request has been filed in the commissioner'
s office.
   (e) This section shall not be construed to increase or reduce the
authority to invest in any operating business trust or limited
partnership specifically permitted in other sections of this code.
